With _______ prices rise in the first sector, remain the same in the second and increase overall?
Correct answer: A. ratchet inflation
- A. ratchet inflation
- B. inflationary expectations
- C. import substitution
- D. demand pull inflation
Explanation
Ratchet inflation describes a price level that rises when demand increases but does not fully fall when demand later weakens, so prices remain higher overall. The price movement therefore resembles a ratchet that moves upward more easily than downward.
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About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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